HYPERSLUG:

That 'Sluggish' Economy: It's still the strongest in the world. (Opinion Journal, December 30, 2004)

According to the November forecast of the Organization for Economic Cooperation and Development, gross domestic product in the U.S. is expected to increase by 4.4% in 2004. Elsewhere, the OECD predicts growth of 4% for Japan, 2.7% for the U.K., 2.1% for France and 1.2% for Germany. For the 12-country euro zone, the figure is 1.8%. To put matters in historical perspective, the last time Japan, Britain, France and Germany had growth rates at or in excess of 4.4%, the years were 1990, 1994, 1989 and 1991, respectively.

But, some say, America's current economic performance is sluggish compared with its past performance. So let's look at the data again. From 1997 through 2000--the great Clinton go-go years--U.S. growth averaged 4.25%. For Mr. Clinton's first term, the average was 3.3%. For the eight years of the Reagan presidency, it was 3.4%. By what standard, then, can this year's forecasted 4.4% be described as sluggish?

Maybe it can be argued that it's been sluggish in terms of job gains. It is true that in 2004 there were some months when job growth failed to meet expectations, although there were other months when expectations were exceeded.

Here again, however, it's worth putting things in an international perspective. Overall, the U.S. economy has added 2.3 million jobs since the third quarter of 2003, bringing the unemployment rate down to 5.4% from 6% in October 2003. In Germany, the unemployment rate is 10%; in France it's 9.5%. For the 27 countries of the OECD, the average unemployment rate is 6.8%. Only Britain and Japan, among the major economies, have unemployment rates lower than the U.S. [...]

Even more revealing are the figures for long-term (12 months-plus) unemployment, as the nearby table shows. Here again, the U.S. looks good. Put simply, about 90% of Americans who lose their job can expect to find another within a year. Lose your job in Europe, and you face far more daunting odds.

All right, but hasn't the U.S. spent its way out of recession, leading to dangerously high levels of debt? Well, again, no. Household debt may be at an all-time high of nearly $10 trillion. But net household worth is also at an all-time high of $46 trillion.

We do need to tweak that job creation number upwards to keep the climate hospitable to immigrants.

Posted by Orrin Judd at December 31, 2004 8:23 AM